I'm trying to re-write the dividend-discount formula below so that rdiv is the result of the formula. tx is limited to x=3.

Attachment 17921

I'm stuck at:

dps1 - (dps3/r^3) = (P0 - P3)(r-1)

Could you please help me out?

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- June 19th 2010, 09:17 AMYvginkelRe-writing formula
I'm trying to re-write the dividend-discount formula below so that rdiv is the result of the formula. tx is limited to x=3.

Attachment 17921

I'm stuck at:

dps1 - (dps3/r^3) = (P0 - P3)(r-1)

Could you please help me out? - June 20th 2010, 04:05 AMSpringFan25
are you sure thats the right formula? The denominator in your sum appears to be applying the same discount factor to all dividends, even though they happen at different times.

I think the formula you want is:

whichever formula you use, provided is constant you can write . You may be able to factorise depending on the values of and . Otherwise you have a cubic in s to solve, time to find a computer... - June 20th 2010, 06:30 AMYvginkel
Sorry, you're right it should be

Where:

is constant;

the sum is maxed for 3 periods; and

x = 3

Hence won't work as the sum has only three periods.

I got to by eliminating and .